Industries which relied on the port would face higher transport costs and a lesser quality of service and could move away from Otago-Southland, Mr Butcher said, giving evidence for Port Otago in the second day of the company's resource consent hearing in Dunedin yesterday.
"If port development does not take place, then within 20 years the regional economy will lose a significant amount of economic activity."
Mr Butcher said he had undertaken a basic partial cost benefit analysis of expanding Port Chalmers to cope with larger ships.
"Deepening the channel to Port Chalmers will generate enormous net benefits to New Zealand."
If Lyttelton's port was also deepened, the benefits would be estimated to have a net present value of $202 million, but if it was not deepened, the benefits were $1.210 million.
If Port Chalmers was not deepened and ships went to other ports, or cargo bypassed Port Otago, it was estimated direct port revenue would decline by $21 million a year.
The regional land freight industry would also decline, he said.
The total regional impact would be a loss of 218 jobs and $26 million a year of regional income.
"By 2028, the loss of container cargo through Port Chalmers will reduce port output by $80 million per year, total regional income by $83 million and total regional employment by 662 jobs."
Added to that, if land transport services reduced and shipping and export/import and manufacturing jobs were at risk, then within 20 years the regional economy would lose more than 890 jobs and $107 million a year of regional income, he said.
Panel chairman John Lumsden said there were many variables in such calculations which required "a great deal of hypothesis and speculation".
Maersk Line (which has 35% New Zealand market share) country operations manager Stuart Jennings said the development planned by Port Otago would allow Maersk to explore the cost advantages for using larger vessels.
"With the volume of refrigerated cargo originating from the Otago and Southland hinterland, a local port able to handle bigger ships currently seems the best option to provide an efficient and cost effective solution for lower South Island businesses."
Answering a question from panel chairman John Lumsden, Mr Jennings said while there were no guarantees the bigger ships would come, it was the next logical step if the market continued to grow as it was.
"The last thing we want is to call only at Auckland and Tauranga and have to move cargo to the North Island.
It would be cost-prohibitive and difficult with refrigerated cargo."
Chamber of Commerce logistic committee chairman George Harris said export activity in Otago had substantial potential for growth, but it was heavily dependent on on well-developed local infrastructure, including a port able to service exporters need.
He believed it would be much more difficult to attract businesses to Dunedin and keep businesses if full or adequate port facilities were not offered at Port Chalmers.
"The location of a full facility export port on Dunedin's doorstep is an essential part of the infrastructure that makes it happen."
